We’re living in the future here in NYC:
New York’s insurance system has been a working laboratory for the core provision of the new federal health care law — insurance even for those who are already sick and facing huge medical bills — and an expensive lesson in unplanned consequences. Premiums for individual and small group policies have risen so high that state officials and patients’ advocates say that New York’s extensive insurance safety net for people like Ms. Welles is falling apart.
The problem stems in part from the state’s high medical costs and in part from its stringent requirements for insurance companies in the individual and small group market. In 1993, motivated by stories of suffering AIDS patients, the state became one of the first to require insurers to extend individual or small group coverage to anyone with pre-existing illnesses.
New York also became one of the few states that require insurers within each region of the state to charge the same rates for the same benefits, regardless of whether people are old or young, male or female, smokers or nonsmokers, high risk or low risk.
Healthy people, in effect, began to subsidize people who needed more health care. The healthier customers soon discovered that the high premiums were not worth it and dropped out of the plans. The pool of insured people shrank to the point where many of them had high health care needs. Without healthier people to spread the risk, their premiums skyrocketed, a phenomenon known in the trade as the “adverse selection death spiral.”
“You have a mandate that’s accessible in theory, but not in practice, because it’s too expensive,” said Mark P. Scherzer, a consumer lawyer and counsel to New Yorkers for Accessible Health Coverage, an advocacy group. “What you get left clinging to the life raft is the population that tends to have pretty high health needs.”
Since 2001, the number of people who bought comprehensive individual policies through HMOs in New York has plummeted to about 31,000 from about 128,000, according to the State Insurance Department.
“In this new marketplace that we envision, this requirement that everybody be covered, that should draw better, healthier people into the insurance pool, which should bring down rates,” said Mark Hall, a professor of law and public health at Wake Forest University. But he added, “You have to sort of take a leap of faith that that’s going to happen.”
Mark L. Wagar, the president of Empire BlueCross BlueShield, said New York’s problem was not deregulation of rates, but the lack of an effective mandate for everyone to buy insurance. To illustrate, he offered a statistic on how many people in the 18-to-26 age group, who are largely healthy, have bought individual insurance coverage through his company: 88 people out of 6 million insured by his company statewide.